Directors of a company in liquidation are liable for misfeasance under Section 543 of the Companies Act, 1956, if they fail to discharge their duties and responsibilities, resulting in losses to the company.

JUDGMENT

1. The Official Liquidator (for short, OL) by way of this company application prays for initiating proceedings under Section 543 of the Companies Act, 1956 (for short, the Act of 1956) against the respondents who were Directors of M/s. Lok Vikas Finance Corporation Limited (for short, the Company in liquidation).

2. Counsel for the OL submits that on 13/04/2001, this Court had passed orders to wound up the Company in liquidation in Company Petition No. 31/2000 and the OL attached to this Court was appointed as Liquidator of the Company in liquidation with directions to take charge of the properties and assets of the Company in liquidation. The respondents were Directors of the Company in liquidation as on the date of the winding up order and Mr. Lokesh Kumar Singh, respondent No. 1 was the Managing Director.

3. During pendency of the instant company application, the respondent No. 6 was deleted from the array of respondents as notices on him remained unserved on account of the address not available with the OL and the amended cause title was accordingly taken on record.

4. The OL submits that vide letter dated 08/06/2004 he directed the Chartered Accountant Mr. NC Jain to examine records of the Company in liquidation to find out whether there is any act of misfeasance made out against the Ex-Directors of the Company in liquidation and the Chartered Accountant submitted his report dated 05/04/2006 concluding that the respondents were guilty of misfeasance and accordingly, the present company application has been preferred as against the respondents alleging of having committed misfeasance in terms of provisions of Section 543 of the Act of 1956 with a prayer direct the respondents to make good the losses caused by them to the Company in liquidation and restore the money and properties of the Company in liquidation alongwith interest at the rate of 18% per annum.

5. Reply to the company application has been filed on behalf of respondents Nos. 1, 2, 3 & 5 and they have denied the charges levelled. It is stated that the Chartered Accountant has acted as a mouth piece of the OL and by no stretch of imagination it can be said to be an investigation into the accounts books of the Company in liquidation. The allegations levelled are based on unverified and unconfirmed story and there was no outstanding dues and no loss or injury has been caused to the Company in liquidation. With regard to the report further explanation has been given by the respondents.

6. Rejoinder to reply has been filed by the OL reasserting the allegations whereafter this Court vide order dated 26/07/2012 framed following issues for consideration:-

"(i) Whether respondents Nos. 1 to 6 had been Directors of the Company in liquidation on or before the date of its winding up?

(ii) Whether respondents Nos. 2, 3 and 5 had resigned from the office of Director of company in liquidation. If yes, when and what is the effect?

(iii) Whether respondents are liable for having committed acts of misfeasance with respect to the amount of 2,85,02,345/- and Rs. 3,89,95,081/-and the other amounts mentioned in paras 17 and 18 of the report dated 05.04.2006 (Anx.1) of the chartered accountant and are as such guilty under Section 543 of the Companies Act, 1956?

(iv) Whether the respondents are guilty of having acted in violation of Section 295 of the Companies Act, 1956 in obtaining loans from the Company (in liquidation) without obtaining permission of Central Government?

(v) Relief?"

7. Learned counsel for the OL submits that the statements of affairs were filed on 04/05/2004 and an application under Section 454 of the Act of 1956 was also filed by the OL, however, the same has been dismissed by this Court.

8. The statement of the OL and the Chartered Accountant were filed by way of affidavits and the respondents were allowed to cross-examine the OL as well as Chartered Accountant. Thereafter, the affidavits of Lokesh Kumar Singh, respondent No. 1 was filed and he was examined as DW-1.

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